Country overview

For years, Britain has stayed a global fintech hub. Even offshores as a natural economic and financial phenomenon are a British invention. No wonder the United Kingdom has a complicated crypto regulation framework.

The UK has a minor level of danger in our research. It has 53,8 points (from 100) for safety in Numbeo crime rating (1). Homicide level (2) is 1,1 per 100,000 a year. Story of firearm-related death (3) 2,8 per 100,000 a year.

There is no law regulating crypto payments in the UK. According to HMRC, cryptocurrency is classified (4) as digital or ‘crypto assets,’ subject to capital gains or income tax, depending on the case. HMRC assumes that it can be converted into GBP by payments.

‍Some UK companies accept Bitcoin Payments, like SCAN UK (5) and Autocoincars (6)

According to HMRC (7), crypto assets received as employment income count as ‘money’s worth’ in EIM00530 (8) and are subject to Income Tax and National Insurance contributions on the asset's value.

An employee may benefit from their employment by receiving a benefit that does not take the form of money. Such profits are often called benefits in kind. Some benefits in kind count as earnings within section 62 ITEPA 2003. Others may be treated as earnings under the benefits code (9). In most cases, the benefits code only applies to benefits that are not otherwise chargeable to tax. So, if a benefit is fully taxable as earnings under section 62 (because it represents money’s worth - see below), the benefits code will not apply.

You may also check some details about this case in the official FAQ (10).

The FCA is the leading licensing authority for crypto entities operating in the country. According to Cointelegraph (11), in 2022, the amount of crypto companies has dropped to 5 five operating under the TTR regime and 33 licensed by FCA. Currently, 41 companies with FCA registration are on the list of registered companies (12).

FCA’s guidance CP19/3 (17), PS 19/22 (18), and HMRC crypto assets manual (19) lay out the different market participants in the crypto-asset ecosystem and the kinds of activities that will be regulated and recognizes three broad categories of crypto-assets: e-money, security, and unregulated tokens. Still, there is a clear regulation framework only for FCA-licensed companies (exchanges, custodian wallets). Utility tokens, ICOs, and DeFi are regulated only case by case (20). There is also no precise regulation for crypto funds.

The UK government website presents a short overview of crypto assets regulation in the country (21). It confirms that the FCA is the leading crypto regulator in the country and is responsible for licensing crypto activities.

Here (22) is the detailed guide from the FCA on which firms need to register (or get a license). According to consulting firm Rue.ee (23), FCA registration is required for the following types of companies:

Exchange from cryptocurrencies to fiat money and vice versa

Exchange from cryptocurrency to cryptocurrency

Crypto ATM operations

Provision of custodian wallet services

Facilitation of peer-to-peer exchange of crypto

According to PWC, the FCA prohibits (24) the sale, marketing, and distribution of crypto-derivatives (excluding security tokens) to retail consumers.

Crypto taxation in the UK is regulated by HMRC - the UK's tax, payments, and customs authority. More information about crypto taxation is in the Koinly guide (25) and Unbiased (26).

1)Numbeo crime rating. Statistics

2)Homicide level. The list of countries by UNODC homicide rate.

3)Firearm-related death. Historical list of countries by firearm-related death rate

4)Is Cryptocurrency Legal In The UK? All You Need To Know. Article

5)SCAN UK. What is Bitcoin? Article

6)10 Steps on How to Buy a Car with Cryptocurrency. Article

7 and 8)EIM00530 - Employment income: benefits in kind taxable as earnings, meaning 'money's worth.’

9) EIM00513 - Employment income: general earnings: amounts treated as earnings. Government Manual

10)British government manual

13) The number of UK crypto firms operating under FCA temporary registration status drops. Article

14)Registered Cryptoasset firms

15)Temporary Registration Regime. FCA has established a temporary registration regime for cryptoasset businesses. Article

16)Economic Crime: responses to the Committee’s Eleventh Report. PDF-file

17)Cryptoassets Taskforce: final report. PDF-file

18)With New Prime Minister, UK Still Wants to Be Crypto Hub: Treasury Official. Article

19)FCA’s guidance CP19/3

20) FCA’s guidance PS 19/2

21 and 30) Cryptoassets Manual

22)What are ICOs? Article

23)Factsheet: cryptoassets technical. Article

24)Cryptoassets: AML / CTF regime - Registering with the FCA

25)CRYPTO LICENSE IN THE UK. Article

26)PwC Global Crypto Regulation Report 2023. PDF-file

26 and 29)Koinly guide. Crypto Tax UK: Ultimate Guide 2023

28)UK cryptocurrency tax guide: everything you need to know. Article

31)UK government's official website

32 and 33)Business Income Manual. Article

34)Cryptoassets Manual

35)Crypto Tax UK: Ultimate Guide 2023. Article

36)Tax Talk: Salary as cryptocurrency – what it means for employers and employees. Article